Fitch: Australian Mortgage Arrears Stable in 2Q15; Conditions are as Good as it Gets

(The following statement was released by the rating agency)Link to Fitch Ratings' Report: Mortgage Market Index - The Dinkum RMBS Index - 2Q15https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871229SYDNEY, September 27 (Fitch) Fitch Ratings says that Australian mortgage arrears have improved by 5bp to 1.12% during 2Q15, as expected. These figures have remained between 1.0% and 1.2% since 4Q13. Fitch believes there is little capacity for significant improvement in delinquencies, given current the low interest rates, strong housing market, and stable unemployment rate.The annualised loss rate continued to improve marginally yoy, as the national house-price gain of 9.8% yoy helped to clear long-dated arrears, and limit losses and claims to lenders' mortgage insurance providers.Self-employed borrowers continue to experience financial difficulties despite the benign economic environment as indicated by the Low-doc Dinkum index which recorded a 28bp increase in 30+ days arrears to 5.72% in 2Q15. Non-conforming borrowers continue to exhibit higher levels of arrears than prime borrowers with the non-conforming index recording a 30+days delinquency rate of 7.96% as of June 2015.We believe arrears may increase if unemployment rises in line with expectations at end-2015. Household expenses are expected to have a crucial role in borrowers' serviceability although CPI rose by just 1.5% yoy in June 2015. Fitch believes that if the cost of living increases and outpaces income growth, mortgage performance will be negatively affected. Fitch's Dinkum RMBS Index tracks the arrears and performance of the mortgages underlying Australian residential mortgage-backed securities (RMBS).Current and historic Dinkum Index data is available in excel form for reference through the full report entitled, 'The Dinkum RMBS Index - 2Q15', available at www.fitchratings.com, or by clicking the link above.Contacts:James ZanesiDirector+612 8256 0306Fitch Australia Pty Ltd. Level 15, 77 King Street, Sydney, NSW 2000, Australia.Hai Duong LeAssociate Director+612 8256 0358Natasha VojvodicSenior DirectorHead of Australian and New Zealand Structured Finance+612 8256 0350Media Relations: Leni Vu, Sydney, Tel: +61 2 8256 0304, Email: leni.vu@fitchratings.com.Additional information is available at www.fitchratings.com.ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S FREE WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.